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Are you thinking of investing in property? However, you don’t have enough cash to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.